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Sept. 16 — Bayer AG’s $66 billion acquisition of Monsanto Co., which will make the German pharmaceutical
giant the largest supplier worldwide of seeds and pesticides, is backed by a strong
and courtroom-tested patent portfolio.

Patents for Monsanto’s Roundup Ready and INTACTA genetically modified seed varieties
produce billions in royalties each year. They’ve also survived numerous challenges
both in courtrooms and at the Patent Trial and Appeal Board, a fast-track tribunal
to invalidate patents. That means royalty money isn’t likely to dry up anytime soon.

“A lot of validity issues have been tested already; the prior art’s been smoked out,”
Neil Smith, a partner at Rimon P.C. and a former administrative patent judge for the
PTAB’s Silicon Valley office, told Bloomberg BNA. “These patents are established as
valid. There aren’t a lot of new attacks available.”

Most importantly, a 2013 Supreme Court ruling affirmed that farmers must buy new seeds
resistant to Monsanto’s Roundup herbicide each year rather than saving Roundup resistant
seeds from each crop to plant the next season (
Bowman v. Monsanto Co., 133 S. Ct. 1761, 1764, 2013 BL 125908, 106 U.S.P.Q.2d 1593 (2013).

Monsanto holds about 6,300 active U.S. patents and patent applications and a roughly
equal number of foreign patents and applications, spokeswoman Christi Dixon told Bloomberg
BNA.

The U.S. patents for the first generation of Roundup Ready seeds expired in 2014,
but the patents for a second generation remain valid. Generic equivalents for first
generation Roundup Ready seeds have not captured a broad share of the market.

Patents Important in Commodities

Monsanto’s foreign patents and the regulatory hurdles that accompany them are particularly
important in the genetically modified seed business because crops are commodities
that are typically collected in bulk and shipped to numerous markets, with crops from
the same pool going to the U.S., Europe and Asia, said Christopher Holman, a University
of Missouri-Kansas City law professor specializing in intellectual property and biotechnology.

For non-commodity products, such as technology and pharmaceuticals, it’s much easier
to control which markets to sell in, Holman said.

“If there’s any part of the world where it can’t be exported, that’s a disincentive,”
he said.

Monsanto patents will also buoy Bayer’s position in its own patent disputes by giving
it a broader portfolio with which to fight back. The German company’s crop sciences
division has battled the agricultural division of Dow Chemical Co. over infringement
and licensing disputes at U.S. district courts and the U.S. Court of Appeals for the
Federal Circuit, as well as before the International Trade Commission.

Bayer is currently appealing a patent infringement suit it brought against Dow, concerning
four patents for genetically modified plant cells, to the Federal Circuit.

Dow is also seeking to combine with DuPont Co. A combined Dow and DuPont, along with
Monsanto and Bayer, would control nearly three-quarters of the U.S. market for corn
seeds and about 65 percent of the soybean market, according to 2015 data from Verdant
Partners, a Champaign, Ill.-based agriculture consulting firm, Bloomberg reported.

Monsanto settled a patent dispute with DuPont for licensing payments of at least $1.75
billion in 2013.

Antitrust Concerns Could Affect IP

Both the Bayer-Monsanto and Dow-Dupont combinations are likely to face significant
antitrust reviews, which could affect the companies’
intellectual property holdings.

Bayer and Monsanto said they will seek approval for the acquisition in 30 jurisdictions
around the world, including the U.S., European Union, Canada and Brazil, and don’t
expect to close until the end of 2017.

Herbicide-resistant seeds are likely to be a focus of those reviews, according to
Jason Miner, an analyst at Bloomberg Intelligence.

The Bayer-Monsanto acquisition is also raising concerns among lawmakers. Some European
Parliament members have started online petitions claiming the combined Bayer-Monsanto
company would dominate the seed market, Bloomberg reported. Senate Judiciary Chairman
Chuck Grassley (R-Iowa) expressed concern about the deal Sept. 14 and scheduled a
Sept. 20 hearing to examine proposed mergers in the seed and chemical industries.

“As mergers continue to occur in the seed, agrochemical and fertilizer industries,
federal antitrust regulators must be ever more vigilant to ensure a robust competitive
environment in this important sector,” Grassley said in a statement.

Outside of patents, the proposed merger raises an additional intellectual property
question, Smith and Holman noted. That is, whether the combined company will take
advantage of the acquisition to stop using Monsanto’s name and trademark, which have
been damaged by public opposition to genetically modified crops or a general reputation
of beating up on small farmers.

Critics have pilloried Monsanto for regularly and successfully suing farmers for planting
seeds without paying royalties. The company also won an appeals court victory in 2013
over a coalition of organic and traditional farmers who sought to force the company
to promise never to sue farmers who accidentally planted seeds containing patented
Monsanto traits. However, the company mostly ceased filing infringement suits after
its 2013 Supreme Court victory.

“Trademarks are usually a large asset, but Monsanto’s not a very good name,”
Smith said. “It will be interesting to see if they continue to use the Monsanto name
or, as a result of the merger, maybe do some rebranding and dilute some of the identification.”

To contact the reporter on this story: Joseph Marks in Washington at
jmarks@bna.com

To contact the editor responsible for this story: Mike Wilczek at
mwilczek@bna.com

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